It's been a year since the New Jersey Turnpike Authority has been in the public debt market, but if it's low on frequency, it makes up for it with volume.
The authority plans to price $1.8 billion of bonds with a mix of new money and refunding, and a small forward-delivery series and some longer-term new issue bonds.
The complex structure offers flexibility while ensuring the authority achieves its targets for savings, according to Tom Feeney, the turnpike authority's media relations & public information manager.
"This multi-faceted approach enables us to evaluate each maturity individually and select the optimal structure — be it current refunding, tenders, forward delivery, or direct placement — based on market conditions and investor demand," Feeney said in an email. "This flexibility allows the Authority to maximize savings on a maturity-by-maturity basis."
The deal is set to price via negotiated sale on May 29, Feeney said.
Series A, $750 million of new-money bonds, will fund the authority's capital program. Barclays is the lead manager for this series, with FHN Financial, Piper Sandler, RBC and Siebert Williams Shank as co-managers.
$135 million of Series A will be serial bonds with maturities from 2043 through 2045. The rest will be term bonds; $272 million is set to mature in 2050 and $343 million in 2055.
Series B, $1 billion of refunding bonds, carries maturities from 2026 through 2039. Jefferies is lead manager, with HilltopSecurities, Oppenheimer & Co, Stifel, and Wells Fargo Securities as co-managers. They will refund Series 2016A, 2017A, 2017B, 2017E, 2017G, 2017F and 2021B, according to the preliminary offering statement. The latter two series are federally taxable.
Series C is $50 million of forward delivery bonds, maturing from 2031 through 2035. These bonds have the same deal team as Series B. According to the preliminary offering statement, this series will refund Series 2016A.
All three series have NW Financial Group as the municipal advisor and MS&B as counsel.
The authority is also entering into multiple forward delivery direct bond purchase agreements with Barclays. Those agreements include $200 million of turnpike revenue bonds, Series 2027 A and $400 million of Series 2028 A.
The directly placed bonds have the primary purpose of refunding Series 2017 A, 2017 B, 2017 E and 2017 G.
Basically, the deal is structured to give the authority as many options as possible for refunding the outstanding bonds.
"Through the tender process, we can identify and refund bonds that yield the most favorable savings, while maturities that do not meet the expected savings threshold can be considered for inclusion in one of the forward delivery structures," Feeney said.
"The authority believed that a tender offer for the taxable bond series was worth pursuing, particularly in conjunction with a broader bond sale," Feeney said. These bonds carry relatively low coupons, and under normal circumstances, the Authority would not have expected to achieve significant savings through a traditional refunding."
The tax-exempt bonds targeted for a tender offer have higher coupons, Feeney said, and the authority hopes to gain "substantial cash flow relief in targeted years."
The authority requires minimum average savings of 3% in its refundings, Feeney said, but the deal team expects more than 4% new present value savings from this issuance.
Ahead of the deal Moody's Ratings maintained its A1 rating and stable outlook on the NJTA's revenue bonds.
The rating is constrained by the credit profile of the A1-rated state government, Moody's said, because it is a component unit of the state, annually transfers funds to the state, and the governor approves the authority's budget and toll rates, "limiting NJTA's autonomy and independence."
"The A1 rating reflects NJTA's strong market position as an essential part of the Northeast's primary road network in a wealthier region of the country," Moody's analysts wrote.
The rating action also noted the history of "continued demand for NJTA's toll roads through large rate increases, economic recessions, and other negative shocks like the recent pandemic."
S&P Global Ratings rates the turnpike authority's bonds AA-minus, with a stable outlook. It has yet to issue a report on the upcoming deal.
The authority paid close attention to market volatility, macroeconomic conditions and federal policy when planning the deal, Feeney said. For the new-money portion of the deal, national turmoil driven by the president's on-again, off-again, on-again
"The structure was strategically designed to align with the authority's existing debt portfolio, starting maturities after 2042 and backloading debt service," Feeney said. This allows the authority to "optimize financial leverage" and get closer to its goal of "leveling the overall debt profile for better long-term budget planning and sustainability."
The authority has three simultaneous capital improvement plans, detailed in its POS. The 2024-2028 Capital Improvement Plan was derived from a capital plan created in 2020. It includes $4.5 billion of projects and the authority aims to spend $600 million on the plan every year.
There's also the 2019 Capital Improvement Plan, which includes 21 projects, and the 2008 $7 billion Capital Improvement Plan, which is nearing completion.
The authority's 2025 budget projected $1.6 billion of total capital spending.
The capital plans are primarily debt-funded, according to Moody's analyst John Medina. The biggest part of its capital program, replacing the
The preliminary offering statement also included new reports from consulting firm CDM Smith on the impact of New York City's congestion pricing program on the turnpike's traffic and revenue.
This is the first issuance from the authority since congestion pricing began in January, and observers have long wondered how the new tolls would reshape the turnpike's traffic, said Medina.
New Jersey Gov. Phil Murphy has frequently railed against — and tried to
Before congestion pricing took effect, CDM Smith, in a traffic study attached to the POS, estimated it would take about $12 million to $25 million from the authority's gross toll revenue, which was $1.68 billion in 2024.
For the first three months of 2025, when congestion pricing took effect, the turnpike's toll revenues are up 4% year over year to more than $391 million, according
The authority, which owns and operates the 144-mile New Jersey Turnpike and the 172-mile Garden State Parkway, has $12 billion of outstanding revenue bonds, according to its offering statement.
This is not the authority's first forward delivery deal;
Forward delivery bonds are priced on a certain date but not formally issued until later. The turnpike authority's Series 2024 C, for instance, priced in April with plans to close on Oct. 3.
Forward delivery deals are advantageous for issuers seeking to "lock in" interest rates months ahead of the redemption date for their outstanding bonds. The structure has become more popular after Congress eliminated the tax-exemption for advanced refundings as part of the 2017 Tax Cuts and Jobs Act.
"The inclusion of forward delivery refunding and direct placement forward delivery structures (the 'Tender Clean-up') is intended to mitigate the risk of limited investor participation," Feeney said. "At the same time, it enables the Authority to capture meaningful savings by achieving tighter tender premiums across select maturities."
The direct placement also helps mitigate market volatility and tax policy uncertainty, Feeney said.
"It also allowed the authority to transfer the risk of any changes to federal tax law with respect to tax-exempt bonds to the underwriter," Feeney said.
The direct placement bonds are also standard practice for the turnpike authority, according to Medina. He estimated that around 10% of the authority's debt came from direct placements.
